The Wisdom of Crowds

Using the internet to make remarkably intelligent desicions.

I spend ten hours on a road trip last weekend catching up on podcasts of conferences I didn’t attend. One presentation in particular was “The Wisdom of Crowds” by James Surowiecki, where he states that aggregated opinions of a group are likely to be more accurate than any individual in the group.

He backs the finding up with dosens of examples.

  • Google pagerank is an example of wisdom of crowds. It makes it possible to find the exact document I’m looking for out of billions of webpages.
  • HP employees can bet on what they think product sales will be, and they’re better than HP’s internal predictions 3 out of four times.
  • Eli Lilly’s customers and employees correctly identified 3 products that would make it to clinical tests and 3 others that didn’t make it.
  • Anybody can place a bet on Hollywood stock exchange to predict box office sales. Usually the sales prediction is better than the studios internal predictions, even though almost noone has seen the movie (as betting takes place before launch).
  • “Who want’s to be a Millionare”, the “call-a-friend” experts get the answer right 2 out of three times. The audience, guess the right answer 91% of the time.

I must say that his presentation really stands out, as James is an excellent speaker that really catches attention, uses lots of examples and of this fascinating subject.
Audio of the presentation is available on the SxSW website (direct link to MP3 – 28MB). Also, there are four excerpts available from the book at the audio page of “wisdom of crowds”.

PS. also Coudal and Fried also do an outstanding opening presentation at SxSW (direct link to MP3 – 29MB)

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3 Responses to “The Wisdom of Crowds”

  1. Barry Welford Says:

    As a statistician I should relate to anything based on the power of averages, I guess. However I think it’s important to know when the crowd is likely to be right and when it’s likely to be wrong. If very strange or unexpected circumstances come up, then you may want to listen to the mavericks in the group. You’ve also got to set up the right environment so that you don’t suppress those mavericks. We’re all aware of those lemmings or the Gadarene swine after all.

    Anyway thanks for surfacing this – it’s most thought-provoking.

  2. Jesper Rønn-Jensen Says:

    Anyway thanks for surfacing this – it’s most thought-provoking.

    Yes indeed, Barry. I really must sat that it’s good intellectual massage! I’ve heard the audio presentation four times, and every time I hear it I feel a little less smart. I mean, this is really hard-to-understand stuff for me.

  3. | Wisdom of Crowds: How Prediction Markets Work Says:

    […] The Wisdom of Crowds by James Surowiecki digs into that phrase and gives excellent examples of how it can be used on the web. I wrote about it earlier after hearing James Surowiecki on MP3 from SxSW. […]